The US Treasury Secretary discusses the importance of coordination and a functional international recovery framework following the demise of Switzerland’s second-largest bank. 

For many, Credit Suisse feels so 2023. The name is already fading from view in international circles, increasingly replaced by the brand of the last major Swiss bank standing – UBS.

For those who may have forgotten, at the onset of the crisis early last year, UBS was forced into the role of a largely unwilling, stopgap parent by the Swiss government, the impact of which is something that finews.asia continues to extensively report and comment on regularly.

Big Lesson

That doesn’t mean that central bank and government officials the world over aren’t using the whole fiasco as one big, instructive banking and finance lesson, with the latest comments on the matter coming from none other than US Treasury Secretary Janet Yellen.

In a speech made on Thursday at the US Treasury Market conference, Yellen first looked at the bank runs experienced by Silicon Valley Bank and Signature Bank, noting that they «were particularly large and fast by historical standards».

Significant Flows

The case of Credit Suisse, however, shows that risks do not «respect national borders» given that many of the largest financial institutions are active around the world, prompting significant cross-border investment flows.

«We got a powerful reminder of the importance of strong international coordination, and especially the need for a well-functioning international framework for recovery and resolution, just last year with the failure of Credit Suisse,» she indicated.

Closer Coordination

According to her, the Treasury continues to work closely with other jurisdictions «before, during and after» times of financial stress. As part of that, it has also made efforts to make sure the policies of the EU, UK, and India are fully understood on all sides.

Quick and Effective

Importantly, Yellen maintained that intentions – and expectations – were clarified when it came to responding to crises.

Reading between the lines, the most important word seems to be expectations. Although not mentioned, it seems to be an indirect warning for others to act quickly and effectively at any sign of stress.

Explicit Demand

That, or face impatient reams of emails and explicit Zoom calls from US officials, including warnings of possible censure of activities in the critical North American markets if they don’t seem to be acting the way they should in limiting possible damage.

She mentioned that financial stability concerns were also at the forefront of matters with the mainland and that the working group co-chaired with the People’s Bank of China (PBOC) had made it easier to coordinate matters in times of stress.

Never Finished

Yellen had a parting shot, saying that the work to build a more resilient financial system will never be complete.

«We’ll never be able to just declare victory. And successes can be hard to fully appreciate because they often entail having avoided counterfactuals. But that does not make them any less significant,» she said.